In re M/s Parker Hannifin India Pvt. Ltd. (GST AAR Karnataka)
a) Whether filters manufactured solely and principally for use by/ in Indian Railways and supplied directly to Indian Railways are classifiable under HSN Heading 8421 or under HSN Heading 8607 of the Customs Tariff (which has been borrowed for classification purposes under GST regime)?
b) Whether the aforementioned classifications of subject goods i.e. filter alter if identical goods are supplied to a distributor instead of Indian railways directly, and the distributor in turn effects supply to Indian railways?
The filters are classifiable under HSN Heading 8421. The classification of the goods shall not alter on account of supply by distributor to Railways.
Read AAAR– GST on Filters manufactured solely for use by Indian Railways
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, KARNATAKA
ORDER UNDER SECTION 98(4) OF THE CENTRAL GOODS AND SERVICE TAX ACT, 2017 AND UNDER SECTION 98(4) OF THE KARNATAKA GOODS AND SERVICES TAX ACT, 2017
1. M/s Parker Hannifin India Pvt. Ltd, (called as the ‘Applicant’ hereinafter), having its registered office at Plot No.320 P2, Near APC Circle, Bommasandra Jigani Link Road, Industrial Area, Jigani Hobli, Anekal Taluk, Bengaluru City District, PIN 560105, having GSTIN number 29AAACP6820G1ZF, have filed an application for Advance Ruling under Section 97 of the CGST Act, 2017 & KGST Act 2017 read with Rule 104 of the CGST Rules, and KGST Rules 2017, in FORM GST ARA-01 discharging t he fee of Rs.5,000/- each under the COST Act and the KGST Act.
2. The Applicant is a private limited company engaged in the manufacture of various type of filters viz., air filter, oil filter, fuel filter etc. The applicant has sought advance ruling in respect of the following question:
a. Whether filters manufactured solely and principally for use by/ in Indian Railways and supplied directly to Indian Railways are classifiable under HSN Heading 8421 or under HSN Heading 8607 of the Customs Tariff (which has been borrowed for classification purposes under GST regime)?
b. Whether the aforementioned classifications of subject goods i.e. filter alter if identical goods are supplied to a distributor instead of Indian railways directly, and the distributor in turn effects supply to Indian railways?
3. The applicant furnishes some facts relevant to the stated activity:
a. The Applicant is inter-alia engaged in the manufacture of various types of filters viz. air filter, oil filter, Fuel filter Different products manufactured by the Company find application in different industrial sectors and some of them are customized to the need and specification of the customers. The Applicant Company is duly registered under the provisions of the Central Goods and Service Tax Act, 2017 (‘CGST Act’) and Karnataka Goods and Service Tax Act, 2017 (`KGST Act’) bearing GSTIN 29AAACP6820G 1ZF.
b. The range of products manufactured and supplied by the applicant includes Filters, which are custom manufactured for Indian Railways as per the design specifications provided by Indian Railways itself. The product so supplied is not a catalogue product of the applicant and is customized to the last mile for Indian Railways on the parameters of Form, Fitment and Function, which thus makes the product’s use exclusively by the Railways.
c. It becomes pertinent to submit that these filters find its application only in the Indian Railways and, as such, cannot be used elsewhere due to limitation of its Form, Fitment and Function as discussed above. In other words, these filters are manufactured `solely and principally’ for its application in the railway engines for Indian railways and have no alternate usage possible not even hypothetically.
d. Oil and/ or fuel filters or other filters could be, generically, classified under the (HSN Based) Tariff Heading 8421; however owing to the fact that these filters are used ‘solely and principally’ in railway/ tramway/ locomotives, classification under (HSN Based) Tariff Heading 8607 also merits consideration.
e. The aforesaid proposition is time and again subjected to interpretation by all stake holders given the specific Section Notes under Section XVI and XVII of the Customs Tariff (which is applied to GST matters for purposes of classification of goods), which do not yield a clear result. It may be noted that the alternate classification probable(s) here lead to varied GST rate scenarios and thus create ambiguity.
f. Separately, it is proposed that going forward the applicant may receive order through an intermediary/ distributor (who would have an existing order of the goods so ordered, from Indian Railways). Hence, the eventual supply of goods shall he to Indian Railways but through the intermediary or distributor implying that the immediate customer for the Applicant would he the intermediary or distributor instead.
g. The modus operandi of the transaction in such instance would, however, not alter. The goods would continue to be manufactured basis express design and specification received by the distributor from Indian railways and shared with the Applicant and that, the manufactured product would still be solely and principally used as a part in the railway/ locomotives.
h. The applicant Company states that he is deemed fit to seek a ruling on the subject classification matter both in current fact patterns of direct supplies and future pattern of supplying to an intermediary or a distributor.
4. The applicant provides the relevant Section Notes under Customs Tariff.
a. The applicant draws reference to Section Note 1 to Section XVI ‑ Machinery and Mechanical Appliances; Electrical Equipment; Parts thereof; Sound Recorders and Reproducers, Television Image and Sound Recorders and Reproducers, and Parts and accessories of such Articles” which covers chapter 84 which reads as under
“1. This Section does not cover:
(a) ….
(b) . . . .
(c) ……(k)… .
(l) Articles of Section XVII”
b. The applicant also refers to section notes to Section XVII (which covers Chapter 86) – Vehicles, Aircrafts, Vessels and Associated Transport Equipments – as under
“2(e) The expressions “parts” and “parts and accessories” do not apply to the following articles, whether or not they are identifiable as for the goods of this section:
(a)…
(b). . .
(c) • • •
(d). . .
(e) Machines and apparatus of heading 8401 to 8479, or parts thereof, other than the radiators for the articles of this Section, articles of heading 8481 or 8482 or, provided they constitute integral parts of engines and motors, articles of heading 8483;”
“3. References in Chapters 86 to 88 to “parts” or “accessories” do not apply to parts or accessories which are not suitable for use solely or principally with the articles of those Chapters. A part or accessory which answers to a description in two or more of the headings of those Chapters is to be classified under that heading which corresponds to the principal use of that part or accessory.”
5. The applicant has also provided that the two relevant Customs Tariff Entries applicable to the product under question are as under
